Eric Ries – The Lean Startup Audiobooktext
Summary of the audiobook” Lean Startup – Adopt continuous innovation “: Éric Ries develops, in this book, all the concepts of themethodology Lean Startup in order to radically increase the chances of success of all those who wish to create their business or develop a new project through continuous innovation.
By Éric Ries, 2011, 337 pages.
Original title: “The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses” Column
and summary of “Lean Startup – Adopt continuous innovation”
The course of the author, Eric Ries
To introduce his remarks, Éric Ries looks back on his journey as an entrepreneur. He has, in fact, set up several startups: he tells us about his beginnings, his failures and the lessons he learned from them in these different startups and within, more recently, the IMVU company. Eric Ries – The Lean Startup Audiobook .
It is a set of elements that gave birth, in its course, the Lean Startup : readings, mentors, some of whom are great brains of Silicon Valley, new ideas on how to create a business, associates ready to experiment with new methods.
The author explains that he first realized that by applying the ideas of lean manufacturing to his own entrepreneurial challenges, he could outline a framework that would allow him to analyze them. This reflection thus led to the Lean Startup, the application of thephilosophy lean to the innovation process.
Eric Ries therefore began to describe this experience on a blog, Startup Lessons Learned, and to speak about it at conferences as well as with companies, startups and investors. By defending his point of view and with the help of other authors, thinkers and entrepreneurs, he has managed to refine the theory of Lean Startup and to advance it. Although his entrepreneurial experience began in the midst of high-tech software, themovement Lean Startup has spread far beyond. Thousands of entrepreneurs are implementing its principles in all sectors.
Eric Ries quickly decided to devote himself full-time to themovement Lean Startup.
The principles of Lean Startup
Over the pages, Eric Ries explains the following five principles of Lean Startup:
- Entrepreneurs are everywhere.
An entrepreneur is anyone who runs a startup as the author defines it: a commercial structure intended to design new products or services under conditions of extreme uncertainty. Therefore, theapproach Lean Startup can be suitable for any business, regardless of its size or industry.
- Entrepreneurship is a form of management.
A startup is a commercial structure, not just a product. It therefore requires a new type of management adapted to its context of extreme uncertainty.
- Validation of lessons.
The sole purpose of a startup is not to deliver products, make money or serve customers. His goal is to learn how to set up a viable long-term business.
- Theloop feedback produce-measure-learn.
The fundamental activity of a startup is to turn ideas into products. This then assesses the reaction of customers to learn the lessons that will allow it to decide whether it should pivot or persist.
- The analytical management of innovation.
It is necessary to use a new type of accounting management specially designed for startups to measure progress, define milestones and establish priorities.
Structure of the book ” Lean Startup – Adopt continuous innovation”
The book is divided into three parts: “Vision”, “Steering” and “Acceleration”.
- The “Vision” section
In this section, Eric Ries pleads in favor of a new technique allowing startups to assess their progress: the validation of lessons. Based on scientific experimentation, this technique helps startups discover how to found a sustainable activity, whether they are taking their first steps in a garage or within an established company.
- The “Steering”
part In this part, Eric Ries presents themethod Lean Startup in detail, describing theloop feedback produce-measure-learn.
- how to develop a minimal viable product (MVP) in order to test its fundamental hypotheses with the greatest rigor;
- how to assess our progress with a new cost accounting system;
- how to decide whether to pivot, that is, to change course, or to persist in the same lane.
- The “Acceleration”
part In this part, Eric Ries offers us several techniques to allow a startup to go through the produce-measure-learn loop as quickly as possible. It also covers:
- Concepts ofmanufacturing lean that apply to startups, such as small batch production;
- The organizational structure of the startup and its mode of growth;
- The principles of Lean Startup to be applied beyond the legendary garage, and even within the largest multinationals.
Part 1: The Vision, according to theconcept Lean Start-up
Chapter 1 – Getting
The startedLean Startup takes its name from the revolution of Lean manufacturing, ormanufacturing Lean, which was introduced at Toyota by Taiichi Ohno and Shigeo Shingo from the 1950s.philosophy Lean radically transformed the way supply chains and production systems are managed.
It is based in particular on:
- Enhancing the know-how and creativity of each employee,
- Reducing the size of batches,
- Just-in-time production,
- Reducing stocks,
- Accelerating cycle times.
The Lean Startup ask people to measure their productivity differently. The development of a new product takes place in spurts. It offers a new way of approaching the development of innovative products, emphasizing:
- Rapid iteration,
- Taking into account the customer’s opinion,
- An extremely strong vision,
- An excessive ambition.
Startups are based on a mechanism that the author calls “the engine of growth”. In the life of a startup, most of the time is spent tuning the engine by improving the product, marketing or operations.
The Lean Startup offers companies adjust their trajectory continuously through what the author calls the loop feedback produce-measure-learn. From then on, the startup knows when it’s time to pivot, or on the contrary, if it is better to persist in the same direction.
Chapter 2 – Defining
The Lean Startup is a set of practices to help entrepreneurs increase their chances of creating a successful business.
A startup, “young shoot” in French, is a commercial structure organized by people who seek to design a new product or service under conditions of extreme uncertainty. It does not matter its size, its sector or its field of activity. On the other hand, a startup’s product or service is intended to be innovative.
Startups have activities related to setting up any structure: hiring creative staff, coordinating their functions and establishing a corporate culture.
Chapter 3 – Learn
The fundamental objective of a startup is to design a business structure under conditions of extreme uncertainty. Its most vital function is its ability to progress.
The Lean Startup rehabilitates the notion of learning according to a concept that Eric Ries calls the validation of lessons. This is a rigorous method aimed at demonstrating the progress of a startup facing a climate of extreme uncertainty.
The idea is to learn what customers really want, not what they say they want or what you think they should want.
Thephilosophy Lean Startup defines value as something that brings benefits to the customer. Everything else is a waste to be eliminated. Thus, the first question that any follower of themethod asks himself Lean Startup is: “How much of our efforts creates value and what part leads to waste?” “. In fact, any effort that is not absolutely necessary to find out what customers want should be eliminated. However, it is easy to make mistakes about customer expectations. The validation of the lessons will therefore be based on empirical data collected from real customers.
The question is not: “Is it possible to make this product?” “. In our modern economy, virtually any product imaginable can be made. The most relevant questions are: “Should we create this product?” And “Can we design a sustainable and successful business around this suite of products and services?” “.
To answer this, we need a method that allows a business plan to be split into its different components and then to test each of them empirically.
In other words, we need a scientific method. In themodel Lean Startup, each product, each feature, each marketing campaign is understood as an experiment whose goal is to validate the lessons learned.
Chapter 4 – Experimenting
4.1. From alchemy to science
In themethodology Lean Startup, a startup performs experiments to see what is brilliant and what to eliminate. These experiments follow a scientific method, they:
- Are guided by a vision (as it would be by a theory);
- Include assumptions that allow predictions of what is expected to happen;
- Serve as a test based on concrete elements.
4.2. Think big, start small
For Eric Ries, you have to think big and start small.
To illustrate this idea, Eric Ries looks back on the history of Zappos, one of the most beautiful success stories e-commerce, according to him, which has been able to meet the expectations of his customers on a small scale, without preventing the realization of the ambitious vision of its founder Nick Swinmurn.
The author then mentions the experience of Hewlett-Packard (HP). This company could have avoided, according to him, a terrible waste by immediately and modestly experimenting his idea rather than by relying on assumptions.
4.3. Breaking everything downbreaking down
This involvesa great vision into its different components.
Thus, the two most important assumptions that entrepreneurs make are:
- The value proposition hypothesis: in order to verify whether a product or a service really brings value to the customers who use it;
- The growth hypothesis: to test how new customers discover a product or a service and, once the program is defined and implemented, how it will spread.
According to Lean Startup, to verify these hypotheses, it is essential to carry out experiments. In themodel Lean Startup, an experiment is more than a simple theoretical investigation. It is also and above all a product.
Unlike a traditional strategy or market research, the approach here is to know what works today thanks to customer feedback. There is therefore no question of anticipating what could work tomorrow by assumptions. It can be completed in its entirety in a matter of weeks – less than a tenth of the time required for traditional strategic planning.
Part two: Piloting from vision to optimization, according to the Lean Start-up model
A startup is a catalyst that transforms an idea into a product. When customers interact with these products, they provide feedback, or customer feedback, and data. This feedback is both qualitative and quantitative.
We can visualize this process in three stages with this simple diagram: produce, measure, learn.
Thisloop feedback produce-measure-learnis at the heart ofLean Startup.
According to themodel Lean Startup, none of these steps is more important than the others. The objective in running a startup is to minimize the total duration of thisloop feedback.
Chapter 5 – Shifting into high gear
According to themethod Lean Startup, each business plan begins with a series of hypotheses that must be tested as quickly as possible.
We saw it in the previous chapter and Eric Ries reminds us through the experience of Facebook, two fundamental hypotheses take precedence over all the others: the hypothesis of value creation and that of growth.
To test these hypotheses, the Lean Startup recommends going directly to customers to understand them. This principle is, moreover, at the heart of Toyota’s productivity system: it is called Genchi gembutsu ; this can be translated as “going to the field to fully understand the situation”. Eric Ries then invites us to leave our chair and explore our potential customers in the same way as Yuji Yokoya, an engineer at Toyota who traveled across the United States, Canada and Mexico by car to design a new model of minivan closer to customer needs.
The purpose of these initial contacts with potential clients:
- Is to confirm that the client has a problem that is worth solving;
- It is not to obtain definitive answers but rather to be able to develop a client archetype in order to humanize the target clientele.
Chapter 6 – Testing
Eric Ries returns at the beginning of this chapter to the beginnings of the Groupon company. Indeed, this example highlights a flagship concept ofvery wellLean Startup : the minimum living product (PMV).
6.1. The role of the Minimum Vital Product (PMV)
Unlike traditional product development methods, which require a long period of reflection and incubation of ideas to try to achieve perfection from the outset, the Minimum Vital Product helps the creator of startup to initiate itslearning process feedbackquickly (and not end it).
The PMV will allow you to go through all the stages of the produce-measure-learn method with the minimum of effort. It is the product which aims to verify fundamental hypotheses.
6.2. Quality and design in a PMV
Before they can be mass marketed, products need to be sold to first-time adopters. They are, in a way, early adopters who wish to be the first to adopt a new product or a new technology.
For many entrepreneurs, this revolutionary product has to be perfect, well thought out and ready for the mass market. It is therefore difficult to present a product early, incomplete and full of defects. We must therefore put aside our traditional professional criteria to adopt a process of validating lessons through feedback.
During the development of the PMV, we must be guided by a simple rule: eliminate any function, any procedure, any effort that does not directly contribute to the lessons sought. The PMV is there to teach us that any additional work beyond what is strictly necessary for a start of learning is wasted, no matter how important it was initially.
The minimum viable product can, in fact, take different forms. Eric Ries describes several examples of this, citing the startups Dropbox, Food on the Table (FotT) and Aardvark.
6.3. Obstacles to PMV
- Formalities and legal constraints:
These relate in particular to the risks associated with filing patents. The author advises to seek the advice of a specialist firm to ensure that all risks are taken into account.
- Fear of competition
Eric Ries explains that having his idea stolen by competitors is, in reality, almost impossible.
- The brand risk
With a low quality VMS, there is the fear of damaging the brand image of the parent company. The author offers a simple solution: launch a PMV under a different brand name.
- The impact on morale
PMV often brings bad news but often provides a healthy dose of realism.
Chapter 7 – Measure
7.1. Analytical management of innovation: to measure the growth rate
Startups are far too unpredictable and their benchmarks far too imprecise to use classic cost accounting. They need a new kind of accounting management adapted specifically to breakthrough innovation. This is what Eric Ries calls the analytical management of innovation.
Analytical innovation management allows startups to objectively prove long-term growth.
The growth rate depends first of all on three points:
- The profitability of each customer,
- The cost of acquiring new customers,
- The rate of renewal of purchase.
7.2. Analytical management of innovation: three stages of learning
Analytical management of innovation is articulated in three stages:
- First stage: Define your frame of reference As
we saw in the previous chapter, it is a question of using a Minimum Viable Product (MVP) to get real data on the current state of the company.
For this, a startup could, in particular:
- Create a single complete prototype of its product and offer it to real customers through its usual sales channel.
- Launch multiple PMVs responsible for collecting customer impressions separately for each hypothesis.
- Before establishing a prototype, carry out a surface test based on itselements marketing : the customer has the possibility of pre-ordering a product that does not yet exist on the market.
This type of testing only assesses one thing: customer interest in trying a new product. They alone are insufficient to validate a growth model as a whole, but are very useful in getting some feedback on key assumptions before investing more money or other resources in a product.
- Second step: Carry out engine adjustments
The startup must strive to adjust its engine to go from basic operation to ideal speed.
This may take many attempts. Once all the product adjustments have been made to achieve the desired ideal rpm, the company reaches the final decisive step: the pivot.
- Step Three: Pivot or Persist
A society that is progressing satisfactorily knows how to learn from its experience. She manages to use them wisely. In this case, it is normal to persist in this way. On the other hand, otherwise, the management team must conclude that its current strategy is lacking. It then needs to be seriously revised.
When a company pivots to achieve its objective, its development process starts again in a way from zero: the company redefines a new starting point and re-sets its engine. We know, then, that the pivot was successful when the activities related to engine settings become much more profitable.
7.3. Cohort studiescohort
Thestudy is one ofanalysis tools of themethod Lean Startupthe most powerful.
Seemingly complex, this analytical method is based on a simple principle: instead of focusing on numbers, such as turnover or total number of customers, it examines the performance of each group of customers (called a cohort). in contact with the product at any given time.
Thistype analysis funnel- resembles the traditional sales funnel used to manage prospects on the way to becoming customers. Startups based on themodel Lean Startup also use it for the development of their products. This provides a quantitative understanding of the customer as well as more reliable predictions than traditional costing methods.
7.4. Decisional and illusory indicators
The analytical management of innovation is useless if the startup is allowed to be guided, wrongly, by a type of illusory figure: the total number of customers for example.
Eric Ries cites the example of the company Grockit to develop several decision-making indicators and not illusory:
- The agile development method
This allows you to reorient yourself very quickly. Its flexible and lightweight operation facilitates responsiveness to changes requested by the product owner.
- A / B comparative tests An A / B
comparative test simultaneously offers two versions of the same product to two groups of customers. By observing the differences in behavior between the two groups, we can deduce the impact that the various variants would have.
In themodel Lean Startup, startups often integrate this type of comparative testing (sometimes called split testing) directly into their product development phases. Indeed, these comparisons help teams to refine their knowledge of customers, of what they want and do not want.
- The Kanban principle The Kanban
method, which originated in the Japanese automotive industry, is an integral part of theapproach Lean Startup : it practices a pull-flow system, created by the customer’s consumption, instead of a system high flow (as most companies do). According to this principle, the company produces a product at the customer’s request, only when it is requested and only in the quantity requested.
The Kanban approach also makes it possible to interrupt the production process at any time in order to resolve an identified problem.
7.5. The triple A (Action, Accessibility, Audit) in the analytical management of innovation
For an analysis to allow an action, it must clearly and objectively establish a cause and effect link. Otherwise, it is an illusory indicator.
For an objective use of the figures in the reports used to make decisions, they must be:
– simplified as much as possible so that everyone can understand the indicators (concrete and tangible units of measurement), based on cohort studies ( which make it possible to transform human and complex behaviors into figures).
– accessible to all: sent by email to all or placed on the website, well organized and easy to read (each experiment and its results being explained in simple language), a simple page summarizing the results.
Entrepreneurship is not just a big innovative idea: the big idea is only 5% of the story. The remaining 95% are made up of the thankless tasks measured by the analytical management of innovation: defining development priorities, targeting customers, selecting customers to listen to, courageously submitting a great visionary idea to continual testing and evaluation.test feedback.
Chapter 8 – Pivot (or persist)
Sooner or later in the development of their product, any startup creator faces a major challenge: knowing when to change course and when to persist.
A pivot, or change of course, consists in rectifying the trajectory in order to test a new fundamental hypothesis relating to the product, the strategy and the growth engine.
People often believe that there is an objective and rigorous formula for deciding whether or not to pivot. This is not the case. It is impossible to remove the human element (vision, intuition, judgment) from entrepreneurship. This would hardly be desirable.
8.1. Analytical management of innovation enables faster pivoting
To address the subject of pivot, Eric Ries tells us the story of David Binetti, CEO of Votizen. He explains how the analytical management of innovation has helped him brilliantly avoid the pitfalls of policy change. Eric Ries details the different phases and the types of pivot through which Votizen went.
In addition, Votizen’s journey highlights certain recurring patterns. One of the main ones is accelerating the development of the minimum viable product. Indeed, it took eight months to develop the first PMV, four months for the second, three months for the third and one month for the fourth.
8.2. A startup’s room for maneuver is measured by the number of pivots it is still capable of making
In general, the room for maneuver a startup has (i.e. the time it has left to take its flight or forfeit) is determined by dividing the cash remaining in the bank by the monthly consumption of cash (burn rate). It then has two means of increasing its room for maneuver: either by reducing its costs or by raising new funds.
However, according to Lean Startup, the real unit of measure of the room for maneuver is the number of pivots that the startup is still able to achieve, that is to say the number of times it will be able to fundamentally change its business strategy. . In other words, the startup must find a way to get the same amount of validated lessons at a lower cost or in a shorter period of time.
8.3. Turning takes courage
Many entrepreneurs who have made the decision to change course say they should have done so sooner. According to Eric Ries, this is due to three reasons:
- First reason: illusory indicators encourage the entrepreneur to draw false conclusions and to confine himself to his own reality. This is particularly detrimental to decision-making, as teams do not think it is necessary to change.
- Second reason: if the hypothesis formulated by the entrepreneur is not sufficiently clear, it is impossible to conclude that it has failed. But without awareness of failure, there is usually no impetus for radical change.
- Third reason: many entrepreneurs are afraid.
8.4. Meetings to decide to “pivot” or “persist”
The revealing signs of a need for change are:
- the decrease in the effectiveness of the experiments carried out on the product
- the general impression that its development should be more productive
The decision reorientation is always emotionally tricky. It must therefore be approached in a structured manner. For this, Eric Ries recommends scheduling regular appointments in advance to decide to “pivot or persist”. For these meetings, each startup must find the rhythm that suits them. The product development team and the sales team must participate.
When changing course, there is no need to throw away all of the above and start over. Rather, it is about adapting what has been created and learned in order to choose a more favorable direction.
By way of example, Eric Ries tells us about the spectacular pivot made by the Wealthfront company. This company is today one of the ten most innovative companies in the financial sector.
8.5. A whole range of pivots
The pivot is more than just a change. It consists of testing a new fundamental hypothesis concerning the product, the business model and the growth engine.
There are different types of pivots, or changes of direction:
- The restrictive pivot: one of the functionalities of the initial product becomes the product in its own right.
- The extensive pivot: the initial product becomes one of the functionalities of a much larger product.
- The customer segment: the company finds that the product it has developed responds to a real problem felt by real customers, but that it is not the customers initially approached; in other words, the product hypothesis solves the right problem, but addresses a different clientele.
- The customer’s need: because of the intimacy it has established with its customers, the company realizes that the problem it seeks to solve is not so important to them; she discovers other related problems more worrying for her customers that she is able to solve either by repositioning the existing product, or thanks to a completely different product.
- The platform: the change is to move from an application to a platform or vice versa.
- Enterprise architecture: this is generally a change between a “high margin / low volumes” model (B2B companies or complex sales cycles), and a “low margin / large volumes of large volumes” model (consumer products ).
- The capture of value: the change takes place among the different methods of monetization or appropriation of existing income.
- The growth engine: the company modifies its growth strategy by changing its growth engines (viral, based on loyalty or based on paid acquisition).
- The channel: the company decides to change its distribution channel (means by which it delivers its product to customers) when it believes it can deliver the same product more efficiently by another means.
- Technology: A company finds a way to achieve the same solution using completely different technology.
Third part: Acceleration, according to themethod Lean Startup
In this third part, Eric Ries presents the techniques that will allow companies of themodel Lean Startup to grow in scale while maintaining their agility, learning attitude and culture of working. ‘innovation.
Chapter 9 – Lot size
9.1. Reducing the size of the lots
To start this chapter, Eric Ries reports an anecdote found in the book “ Lean System” by James Womacck and Daniel Jones.
The anecdote concerns a routing they carried out with their children. For each mail, they had to write the recipient’s address, stick a stamp, put the letter in the envelope and close it. To achieve this task, two methods can be used:
- Fold all the letters, close them and then paste the stamps,
- Perform the four tasks for each mail one after the other.
Although appearing ineffective, this latter method, envelope by envelope, is, in fact, the fastest. Numerous studies have shown this, one of which was the subject of a video.
With this example, Eric Ries seeks to demonstrate that production in small batches is ultimately faster than mass production.
Moreover, even if the two methods took exactly the same time, the production in small batches would remain more interesting. In fact, this allows a finished product to be released every five to ten seconds. With mass production, all products come out at the same time and only at the end of the process. This can represent hours, days, or even weeks.
The great advantage of small batch production is that it allows:
- To identify quality problems more quickly: the author gives the example of Toyota’s Andon alarm system;
- To react immediately if in the meantime the customer decides to no longer buy the product.
In conclusion, by reducing the batches, we minimize the investments in time, money and effort that could prove to be unnecessary.
To better understand, Eric Ries relates several examples of companies, in particular that of SGW Designworks specializing in rapid industrial production techniques.
9.2. Replace theflow system with the pull-flow system
push-In manufacturing, the “pull-flow” system consists of ensuring that production adapts to the volume of customer demand. Without it, factories risk producing too many or not enough parts that customers actually want.
Based on this system, the ideal, according to the concept of Lean Startup, is to achieve small batches throughout the chain. In fact, each step of the production chain pulls the necessary parts from the previous step. This is Toyota’s famous “just-in-time” production method. When a company switches to this mode of production, its warehouses are immediately emptied because its stocks “in case” (also called “in progress”) are reduced considerably. It is as if the entire production chain has suddenly gone on a diet. Hence the name ofmanufacturingLean, which means “skinny” in English.
Thus, until the day of delivery, all the work devoted to the development of the minimum viable product is only a work in progress.
Chapter 10 – Growth
In this chapter, Eric Ries describes the metrics that a startup should rely on to assess its growth as it acquires new customers and uncovers new markets.
10.1. Where does the growth come from?
The growth engine is the mechanism that startups use to develop in a sustainable manner. One-off actions that generate a sudden influx of customers with no long-term impact are excluded (eg a single advertising campaign intended to boost growth but unable to make it last).
- New customers come from the actions of old customers
Sustainable growth is based on a very simple rule: new customers come from the actions of old customers. These former customers can drive sustainable growth in four ways:
– Word of mouth: Products contain natural growth driven by the enthusiasm of satisfied customers.
– By using the product: Fashion items, prestige items or so-called viral products (such as Facebook and Paypal) attract attention when used.
– By contributing to the financing of advertising: if the cost of acquiring a new customer (the marginal cost) is lower than the revenue generated by this customer (the marginal revenue), the difference (the marginal profit) can be used for acquire more customers. The more marginal profit increases, the faster the growth.
– By renewing the purchase or use of the product: certain products are intended to be purchased several times, either through a subscription (e.g. cable television) or by voluntary renewals (e.g. .: power supply, light bulbs).
10.2. Three types of growth engines
Sustainable growth relies on three types of engine: either profitable, viral or loyalty. Each engine requires focusing on specific indicators to assess the success of a new product and determine subsequent experiments. Operated using the analytical innovation management method described in the previous section, these indicators allow the startup to know when its growth is likely to run out of steam, and to decide to pivot to remedy it.
- The Loyalty-Based Growth Engine
It is about attracting and retaining long-term customers.
Companies that rely on this growth engine closely monitor their termination rate or attrition rate (= percentage of customers who have stopped committing to the product): if the rate of acquisition of new customers exceeds the attrition rate, the product will grow. The company must therefore work to increase its retention rate.
- The viral growth engine
The viral growth of a product relies on transmission from one person to another as an inescapable consequence of its normal use: the customer does not intentionally act as an evangelist, he does not necessarily try to publicize the product.
The viral engine is fed by a feedback loop called the “viral loop”. The speed of this viral loop is determined by what is called the “viral coefficient”. When a product has a viral coefficient of 0.1, it means that one in ten customers will recruit one of their friends. Such a loop is not viable. On the other hand, a viral loop with a coefficient greater than 1 will generate exponential growth because each new customer will bring on average more than one friend.
Therefore, a company relying on this type of growth engine must first and foremost focus on increasing its viral coefficient. With a viral engine, currency exchange does not lead to further growth. It just indicates that customers like the product enough to be willing to pay.
- The engine based on paid acquisition
This engine works either by increasing the revenue from each customer, or by reducing the cost of acquiring this new customer.
During their “life” as a customer, each user spends a certain amount of money on a product. After deducting variable costs, this amount, generally referred to as “customer life time value ”, can be invested in growing the business by advertising.
In theory, several growth engines can be employed at the same time in a company. Thus, some products have very rapid viral growth and extremely low customer attrition rate. In addition, nothing prevents a product from generating both high margins and a high retention rate. However, in the author’s experience, successful startups tend to focus on a single engine of growth. This is why the latter strongly recommends that startups focus on one growth engine at a time.
Most entrepreneurs have a clear assumption right from the start about what type of engine is likely to work. Otherwise, their field discussions with customers will quickly point them to which one should be the most profitable.
10.3. When the engine runs outsteam
ofEach growth engine relies on a set of customers with their habits, preferences and advertising channels. At some point, this clientele will run out, sooner or later depending on the sector.
Thus, it is essential that the startup is able to manage its engine while developing new sources of growth to anticipate the inevitable day when its engine will run out of steam.
Chapter 11 – Flexibility
In the principle of Lean Startup, a company must equip itself with an organizational structure, a culture and a discipline in order to be able to manage the rapid and often unexpected changes. This is what Eric Ries calls “a flexible structure”.
11.1. The Andon signal
According to themethod Lean Startup, each startup should equip itself with regulators that allow it to find an optimal rhythm.
Eric Ries cites the Andon signal as an example of speed regulation. The advantage of the Andon alarm is that it interrupts work, the production line, as soon as a problem appears. This then forces teams to find the cause of the problem before it impacts the rest of the chain. The Toyota company sums up this technique as follows: “Stop production so that production never has to stop”.
11.2. The “five whys”
This systematic problem-solving tool created by Taiichi Ohno, father of the Toyota production system, is based on the principle of asking the question “why?” Five times. and answer them. In the concept of Lean Startup, this method makes it possible to react quickly to problems, without investing more than necessary.
First of all, the “five whys” method allows us to trace the root cause of a problem that is behind more glaring symptoms. Eric Ries explains to us that most of the problems which seem to be due, at first glance, to a single error, result, in reality, from insufficient training of the personnel or from an inadequate instruction in the guide of procedures of the company. .
In addition, the author suggests following the “five whys” method to invest proportionately at each of the five levels. In fact, it is about investing less when the symptom is minor, and more when the symptom is more important.
The purpose of the “five whys” method is to help us realize that recurring problems are the result of an improper process, not an individual’s unwillingness.
Therefore, there is no question of blaming anyone in this method.
In order to escape the “five blame” trap and optimize the results of the “five whys” method as much as possible, Éric Ries recommends several tactics:
- Make sure that everyone affected by the problem is present in the room when analyzing root causes;
- Look at things at the systems level;
- Create an environment of mutual trust and accountability;
- Treat all mistakes with indulgence the first time and never let the same mistake happen a second time;
- Be prepared to discover unpleasant facts about your business;
- Name a person responsible for the “five whys”: this one must be high enough in the hierarchy of the company to have the necessary authority to verify the execution of these tasks, but not too much in order to be available for each of them. meetings;
- Do not submit all of your problems at once: start “five whys” sessions as new problems arise;
- Take a few minutes to explain to new participants what this process is and what it is for.
Chapter 12 – Innovation
12.1. Making the ground conducive to disruptive innovation
In thephilosophy Lean Startup, in order not to fail and promote innovation, a startup must have at least the following three characteristics:
- Limited but reliable resources
Startups require less capital , but it should certainly not vary halfway.
- The ability to develop its activity in complete independence
The team that engages in a start-up activity must benefit from total autonomy to develop and market new products. It must be able to design and implement experiments without having to obtain an incalculable number of authorizations. Transfers between departments and hierarchical approvals only slow down theloop feedback produce-measure-learnand hinder the validation of lessons and accountability.
- A personal interest in the results
The entrepreneur must find a personal interest in the success of the startup.
This interest can take the form of stock options or performance bonuses. However, it is not necessarily financial. This can be, for example, the attribution of merit, in case of success, of the new product to its creator.
12.2. Creating an experimentation platform: an sandboxinnovation
The idea, in the concept of Lean Startup, is to create a test environment or sandbox innovation(literally “sandbox”).
According to Eric Ries, any team can set up a comparative test type experiment on parts of the product or service. However:
- The same team must follow the experiment from start to finish;
- No experiment should exceed a previously specified duration and should not affect more than a certain number of clients;
- Each experiment must be evaluated on the basis of a single standard report based on five to ten decision indicators;
- All the teams that work within the sandbox innovationand all the products designed therein must be evaluated according to the same indicators;
- Any team initiating an experiment should monitor metrics and customer feedback as it unfolds, and abandon it in the event of a catastrophic impact.
After being incubated in the sandbox, an innovative product must return to the parent company. A larger team will be needed to develop, market and grow it. As a first step, this team will need to be supervised by the innovators of the sandbox.
Whenever possible, the innovation team should be multidisciplinary and report to a clearly designated manager. It must account for the success or failure of these approaches by using standard decision indicators and analytical management of innovation.
12.3. Maintaining the portfolio of activities
A company must manage four main phases of activity:
- Research and development of innovative products,
- Product growth once it has found its market,
- Product optimization through incremental innovation ,
- Cost control.
However, very often, employees follow the products they develop in each of the different phases. It is usually the inventor of the product who manages the resources, the team or the department that will market it. Inventive managers then find themselves working on the growth and optimization of their product instead of creating new ones.
This is one of the reasons that established companies struggle to find creative leaders to spark innovation.
Chapter 13 – TheMovement Lean Startup
Today, our production capacity far exceeds our ability to know what to manufacture. We are able to produce just about anything we can imagine. The big question is no longer whether we can do it, but whether we should do it. In other words, it’s about avoiding waste.
The Lean Startup is based on the belief that innovation, waste can be avoided. To do this, we just need to change the way we work.
In this chapter, Eric Ries suggests several avenues of work in this direction:
- Create testing laboratories for startups that would test all kinds of product development methodologies;
- Form small multidisciplinary teams and ask them to solve problems using different development methodologies;
- Establish partnerships between university research teams and the entrepreneurial communities they seek to support: universities should intervene other than by simply funding or creating startup incubators;
- Set the goal of transforming the ecosystem of entrepreneurship as a whole;
- Establish a new kind of stock exchange where the securities of companies which have adopted a long-term policy would be exchanged; for this, Eric Ries proposes to create a long-term stock exchange (BVLT).
Chapter 14 – Joining the movement
The Lean Startup has grown globally. It is important, according to Éric Ries, to integrate into an entrepreneurial ecosystem. The author, however, cautions against any rigid doctrine regarding themovement Lean Startup.
Also, at the end of his book ” Lean Startup “, Eric Ries lists some of the best events, books and blogs to document and practice further. He also invites us to explore his website ” The Lean Startup ” to find other sources of information on this concept and continuous innovation.
Conclusion of “Lean Startup – Adopt continuous innovation” :
At the beginning of the book, Eric Ries, tells us about a well-known scenario in project implementation: the team is working hard to imagine, then to create an industrial perfect first product. She manages to bring it to market only to realize that the product only interests a marginal audience, performs poorly and, therefore, does not have the essential features.
We understand, at the end of this reading, that the idea of Lean Startupis to work differently so that such a scenario does not take place.
Indeed, the essential notion ofthinking Lean is the confirmation, or validation of the teachings. Eric Ries starts from the observation that intuition is a very bad guide to design new offers as long as it is not validated by a rigorous “confirmation”:
- On the one hand, the developers of new products get an idea wrong about what customers really care about;
- On the other hand, customers themselves generally have difficulty expressing their specific needs.
In theprinciple Lean Startup, the important thing is therefore to get to know your client without relying on what he says. To do this, we must offer them concrete models of the product, functional prototypes (the famous minimum vital product) in order to see them react in a situation and remain attentive to their reactions. Indeed, it is a question of measuring these purchasing behaviors in order to guide the design which, in themethod Lean Startup, highlights the importance of “small batches”.
Stemming from the ideas of Lean management, Lean Startup is an innovative method that is aimed at all those who wish to create a business or develop a new project. By following the principle of continuous innovation, this approach makes it possible to constantly adapt its products and its company to the needs of customers and to changes in the market.
In summary, Lean Startup allows more precisely to optimize speed and quality in terms of production. It eliminates “waste” to achieve business results, according to Eric Ries, unmatched. It avoids unnecessary work that does not provide any teaching. Finally, it is the source of new business structures whose long-term mission would be to create lasting value and make the world a better place.
The book “Lean Startup – Adopt continuous innovation” is essential reading for any entrepreneur or business creator to increase their chances of success and who wish to develop their original business model. It is a real reference, rich in essential concepts, for any company, large or small, which plans to totally change its way of working by adopting themethodology Lean Startup.
Strengths of Eric Ries – The Lean Startup Audiobook :
- An inspiring methodology illustrated with many examples of companies that have been able to encourage creativity by adapting to the needs of their clients;
- All the flagship concepts of Lean Startup are developed to re-invent the way it works and strive for continuous innovation: theloop feedback produce-measure-learn, the Minimum Vital Product, the Kanban principle, the five whys, agile development, the engine of growth, analytical management of innovation, etc.
Weak points from Eric Ries – The Lean Startup Audiobook :
- A few repetitions during the chapters which takes away some clarity from the content.